There has been a lot of talk recently about the upcoming mandating of payrolling benefits. With changes set to impact employers across the board, it’s a good time to review what we know so far and what steps can be taken to prepare.
What Has Been Confirmed for Payrolling Benefits?
On 30 October 2024, HM Revenue and Customs (HMRC) released a policy paper outlining the future of payrolling benefits. Here are the key points:'
Mandatory Payrolling from April 2026 Most benefits will need to be payrolled starting in the 2026/27 tax year.
Voluntary Exceptions Employment-related loans and accommodation benefits will remain voluntary for payrolling.
Retention of the P11D Process The familiar P11D process will still be available for those who choose not to payroll certain benefits.
End-of-Year Adjustment Mechanism HMRC plans to introduce a process to amend uncertain or fluctuating benefit values at the end of the tax year.
Penalty Relaxation Period To ease the transition, HMRC is considering relaxing penalties for the first year (2026/27) as businesses adjust to the new requirements.
Registration with HMRC
Until April 2026, employers who wish to payroll benefits must continue registering with HMRC.
From April 2026, registration will no longer be required unless you choose to voluntarily payroll loans or accommodation, for which notification to HMRC will still be necessary.
What’s Still in Development?
HMRC is collaborating with industry bodies, including the, to finalise changes to the Real-Time Information (RTI) reporting process. Their shared aim is to ensure that these updates don’t create unnecessary administrative burdens for employers.
Preparing for the Changes
1. Understand Your Obligations
Begin by reviewing the benefits you currently provide and how they will be affected. Will they fall under the mandatory or voluntary categories?
2. Evaluate Payroll Software
Ensure your payroll software is equipped to handle payrolling benefits efficiently. Vendors are likely to release updates ahead of the April 2026 deadline, so stay informed about available upgrades.
3. Engage Your Team
Train your payroll team or provider to understand the new requirements, ensuring they’re ready to manage payrolling seamlessly.
4. Communicate with Employees
Employees may have questions about how payrolling benefits will impact their payslips or tax positions. Clear and proactive communication will help manage expectations and build trust.
5. Plan for Transition
Use the 2025/26 tax year to test voluntary payrolling for benefits. This practice period will help you iron out potential issues before the changes become mandatory.
Stay Updated
This information is accurate as of the date of publication. However, legislative details are subject to change. Keeping an eye on updates will ensure you remain ahead of any developments.The move toward mandatory payrolling of benefits represents a significant shift in payroll processes. By preparing early and leveraging the tools and resources available, employers can transition smoothly while maintaining compliance and efficiency.
Let’s stay proactive and ready for April 2026!
Want to talk more? Why not jump on a free call with Austin - Reach out: austin@yourpayrollmanager.co.uk
.png)